India - Pakistan trade relations

Pakistan moved closer to granting most-favoured nation status to India by switching to a system of “negative lists” that will restrict the import of around 1,200 items from India, compared to only 1,900 products that were permitted to be shipped across the border earlier. Although Pakistan said that it will not compromise on any “core issue” such as Kashmir — a statement meant to placate hostile elements within the country —in the next stage, Islamabad has committed to phase out the negative list by the end of 2012 and move to a regime that complies with norms set by the World Trade Organization. Since 1996, when India granted MFN tag to Pakistan, New Delhi has demanded that its neighbour reciprocate. But things started moving only last year, when Pakistan decided in-principle to grant MFN only to go slow. But during a recent visit by commerce & industry minister Anand Sharma, Pakistan finally agreed to allow free trade. “This will mark a dramatic shift in the lines that can be traded as now almost 90% items can be traded with Pakistan as opposed to 17% earlier,” the commerce department said in a statement. Following a cabinet meeting, which approved a negative list of 1,209 items, Pakistan will now permit import of around 6,800 products from India. The move will not only boost exports of textiles and pharmaceuticals from India, it will also result in direct trade between the two neighbours. In the absence of normal relations, several products were routed to Pakistan through third countries such as the UAE. During the last financial year, trade between India and Pakistan was estimated at $2.6 billion.